Costco Sarah Casavan Kati McCoy Janelle Powell

Overview  As of Sept. 2006: Operated 458 Warehouse clubs  358 in the US (37 states and Puerto Rico)  68 in Canada  18 in UK (15 in England, 3 in Scotland)  5 in Korea  4 in Taiwan  5 in Japan

Mission Statement  To continually provide members with quality goods and services at the lowest possible prices.  In order to achieve mission they conduct business with the following Code of Ethics in mind

Code of Ethics  1. Obey the law.  2. Take care of members.  3. Take care of employees.  4. Respect suppliers.  5. Reward shareholders.

Business Plan  offer members very low prices on a limited selection of nationally branded and selected private label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover  Enables them to operate profitably at significantly lower gross margins than traditional wholesalers, mass merchandisers, supermarkets and supercenters.

Warehouses  typical warehouse 140,000 square feet  Floor plans are designed for economy and efficiency in the use of selling space, the handling of merchandise and the control of inventory.  By strictly controlling the entrances and exits of warehouses and using a membership format, they have limited inventory losses to less than two- tenths of one percent of net sales in each of the last three fiscal years well below those of typical discount retail operations.

Warehouses  Carry an average of 4,000 SKUs as opposed to typical discount retailers and supermarkets that usually carry 40,000 to 60,000 SKUs Only provide products that they can provide at a deep discount

Advertising  Limit marketing and promotional activities to new warehouse openings, occasional direct mail marketing to prospective new members and direct marketing programs (such as the Costco Connection) to existing members promoting selected merchandise.  Create much lower advertising costs compared to most retailers

Membership  designed to reinforce customer loyalty and provide a continuing source of membership fee revenue, which allows them to offer low prices.  Members can utilize their memberships at any Costco warehouse location.  have two primary types of members: Business, and Gold Star (indiv.) Can also upgrade to an Executive membership Businesses, including individuals with a business license, retail sales license or other evidence of business existence, may become Business members. Executive memberships are more expensive ($100 annually instead of $50), but offer additional savings

Energy Management Conservation  To keep prices low, they try to keep costs low Energy is a significant cost, so they already try to conserve as much as possible  As new technology is developed, Costco continues to look for new ways to improve Benefits customers as well as communities  Utilize sky-lights to decrease light usage  Constantly watch for new technology offering greater light at lower cost  Use minimal lighting (compared to others)

Conservation  Installed solar panels in one of their California Warehouses Has been successful in lowering lighting and cooling usages and costs Plan in install in additional warehouses  Reducing Fuel Consumption Training drivers in “fuel-efficient methods” Using Hybrid trucks – scheduled for testing in Spring 2007  Encourage employees to carpool wherever practical  Commute Trip Reduction (CTR) program twelve years ago at corporate office with eighteen vans. Today, we have fifty-two vans (vans, fuel, maintenance and insurance provided by four transit agencies),  Offer employees subsidies to vanpool and employees who purchase monthly bus passes.

SWOT Analysis - Strengths  Offer items at a deep discount  Lower advertising costs  Many locations  Food Samples – make shopping enjoyable  Food Vendors – don’t have to leave for lunch/dinner – shoppers stay longer Hot dogs, pizza, churros, ice cream, chicken bake, etc.  Conservation efforts  Return Policy No receipt, no questions asked

SWOT - Weaknesses  Membership only Membership prices  No advertising  Most have bad parking  Warehouse layout  High Turnover  Only offering products in bulk

SWOT - Opportunities  Expansion (into other states)  Advertising  Continued Conservation Efforts

SWOT - Threats  WinCo  Sam’s Club  Other retailers in respective markets (Wal-Mart, Target, Lowe’s, Home Depot, etc.)

Sources  ir.net/media_files/irol/83/83830/repo rts/ pdf ir.net/media_files/irol/83/83830/repo rts/ pdf  ir.net/media_files/NSD/cost/reports/o ur_mission.pdf ir.net/media_files/NSD/cost/reports/o ur_mission.pdf